This week’s word is bankruptcy.
Our focus here is on how bankruptcy impacts condo or HOA collections.
There are different types of bankruptcies, but all types prevent associations (and other creditors) from continuing with collection activities. Depending on the type of bankruptcy, everything might be wrapped up in as short a time period as three months, or it could take as long as six years. Did I just say that?
The good news is that from the time of the declaration of bankruptcy, the owner is liable for all future obligations, i.e. no more free ride.
The value of the home compared to the value of the debt, along with the type of bankruptcy will influence how this all plays out. Ultimately, the association should rely on their legal counsel to make sure they are pursuing the best course of action, given the unique circumstances of each case.
Here is a Bankruptcy Memo on this topic, in case you want to learn more.
Legal disclaimer: I am not an attorney. This should not be considered legal advice.